Bidvest Sees Challenging Trading Environment for South Africa

(Bloomberg) -- Bidvest Group Ltd., the South African holding company with interests spanning catering to office supplies, said the country's economic environment is a “major concern” and that it's struggling to conclude government contracts.

While the company said in February that trading would improve, that outlook has changed and “market conditions have deteriorated as reflected in lowered business and consumer confidence,” Johannesburg-based Bidvest said in a statement on Thursday.

“In view of the volatile socio-political outlook and the weaker than expected macro-economic environment, we now expect more challenging trading conditions for the rest of calendar 2017,” it said. “With many government departments, state-owned enterprises and parastatals in flux, the finalizing and closing of contracts is challenging.”

South Africa unexpectedly tipped into a recession after the economy shrank for a second consecutive quarter in the first three months of this year. Since then, political uncertainty has grown after President Jacob Zuma changed his cabinet and fired Pravin Gordhan as finance minister in March, a move that resulted in Africa's most-industrialized economy losing its investment-grade status with two ratings companies for the first time in 17 years.

Bidvest fell 2.9 percent to 162.26 rand as of 10:29 a.m. in Johannesburg, giving the company a market value of 54.4 billion rand ($4.2 billion). The business's financial position remains sound and cash generation strong, it said. The company has retained “adequate headroom to accommodate larger acquisitive and organic expansion opportunities, which we are actively seeking, both locally and internationally,” Bidvest said.

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Paul Richardson, Jacqueline Mackenzie